Bitcoin Faces Potential Decline as US Federal Reserve Rate Cut Looms, Analysts Warn

Bitcoin traders could be in for a challenging period as the anticipated interest rate cut by the United States Federal Reserve might result in a drop in Bitcoin’s price, contrary to market expectations of a potential boost. According to analysts, Bitcoin’s value could fall to levels not seen since February.

A long-expected rate reduction by the Federal Reserve could push Bitcoin down instead of driving it higher, as many had hoped. Analysts from Bitfinex suggest that a rate cut this month could trigger a 15-20% decrease in Bitcoin’s price, with the cryptocurrency potentially dropping to a low between $40,000 and $50,000.

In a note dated September 2, Bitfinex highlighted that September is typically a volatile month for Bitcoin, and the Fed’s rate cut would likely introduce additional complexities, amplifying market instability. However, the analysts also cautioned that this prediction could be easily invalidated if broader macroeconomic conditions shift.

“This is a period of uncertainty for traders,” the note mentioned. The Fed is expected to make its rate decision on September 18, and optimism has been building around a potential rate cut following dovish comments from Fed Chair Jerome Powell in August, signaling that “the time has come” for such a move.

Historically, investors tend to favor riskier assets like Bitcoin when interest rates drop, as more traditional investments like bonds and term deposits offer lower returns. At the time of writing, Bitcoin is priced at $57,754, reflecting a 2.67% drop over the past week, according to CoinMarketCap data.

A 20% decline from its current price would bring Bitcoin to around $46,000, a level last reached in February. Markus Thielen, head of research at 10xResearch, has previously stated that Bitcoin would need to fall into the low $40,000s before the next major bull run can begin.

Thielen predicted in early August that Bitcoin’s next bull market entry could be timed when prices dip into the low $40,000 range. Supporting this, Bitcoin Layer analyst Joe Consorti noted in a September 3 post that $60,000 is no longer a speculative peak but rather a consolidation point for long-term investors to accumulate and hold Bitcoin.

Meanwhile, trader Daan Crypto Trades observed that Bitcoin continues to struggle around its Bull Market Support Band, without making a decisive move in either direction.